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Widespread distress as demonetization hits small, medium businesses hard

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A huge wail of distress is being heard from small and medium business enterprises across India that have been hit hard by the demonetization of high-value notes.
Alarmed by the drastic fall in trade, commerce and business activities by around 75 percent post-demonetization, traders in Maharashtra have demanded various types of concessions to help tide over losses since the Rs 500 and Rs 1,000 notes were demonetized on November 8 in an ostensible bid to control black money and weed out fake currencies.
A delegation of the Federation of Retail Traders Welfare Association (FRTWA), led by its President, Viren Shah, met Chief Minister Devendra Fadnavis and apprised him of the situation.
Similar concerns are being express by SMEs across the length and breadth of the nation — and their plight seems to suggest that it is this sector that will be hardest hit as the GDP rate takes a beating post-demonetization: falling to 3.5 per cent, according to an Ambit Capital estimate.
Owners of small businesses in Punjab, Haryana and Chandigarh say that sales have dropped 50 to 60 per cent since the demonetization. “Our stocks are not coming. We have even been waiting for the glass bottles of our shakes, which are very popular. The transporters are not bringing the stocks,” the owner of a popular eatery in Chandigarh’s Sector 8, told IANS.
Grocers say that sales have dipped because people either don’t have the new currency or there is no change. “If someone brings the new Rs 2,000 currency note and buys things worth even Rs 250, we are at pains to return change,” said Mukesh Kumar, a grocer in Patiala town, 80 km from Chandigarh.
Rajasthan’s capital Jaipur, famous for its gem and jewellery sector, has seen a sharp decline in business. Jewellers say their trade has come down by almost 50-60 per cent in the last 10 days or so.
A similar situation prevails with the world-renowned Jaipur quilts. “Our trade has seen a sharp decline of almost 60-70 per cent as our quilts were bought mainly by tourists — and now they do not have cash,” said a quilt trader in the city.
Business activity in the bustling markets in Old Delhi has slowed down as the demonetization move continues to hurt local traders, with markets facing a 50-90 per cent slump in their business.
“Despite strong competition from malls and e-commerce portals, the local traders had managed to retain and grow the customer base so far. However, customers are avoiding shopping at the local markets now due to insufficient cash in the system and local traders do not have an online payment facility,” Sanjay Bhargava, General Secretary, Chandni Chowk Sarv Vyapar Mandal, told IANS.
Trade in potatoes, a much sought-after produce of Himachal Pradesh, is at a standstill owing to the cash crunch after demonetization. “There is hardly any wholesaler or agro commodity trading house to buy the potatoes in this area. Most of the farmers have been forced to sell the produce at rates almost less than the actual cost of production,” Najaib Gill, a prominent potato grower of Una town, told IANS.
On Goa’s beaches, at the beginning of the peak season, the only thing upbeat appear to be the waves. “There is no business. Most foreigners are cash-strapped. Even after standing in queues, they do not get the legal currency notes and we cannot accept old notes. Shacks are suffering because of the demonetization,” All Goa Shack Owners Association President Cruz Cardozo said.
In Hyderabad, Mohammed Ahmed, who deals in hardware and tools, said business was down by 50-70 per cent in the last two weeks. “Customers are coming either with spiked notes or new notes of Rs 2,000. There is acute shortage of loose change which has badly hit our business,” said Ahmed of United Agency in the Moazzam Jahi Market area.
In Bengaluru, hawkers, street vendors, roadside shops, eateries, retail outlets and small traders across the board are the worst-hit, as their business plunged over 50 per cent due to the cash-crunch. “Though we managed to serve customers in the initial days with the cash in hand, we could not do business as before due to shortage of notes from Rs 10 to Rs 100,” Sharon Tea Stall owner Abraham told IANS in Bengaluru’s eastern suburb.
In Chennai, K. Gopalakrishnan, Managing Partner, TransGears, and past President, Tamil Nadu Small and Tiny Industries Association, told IANS that the cash crunch will aggravate in December when wages have to be paid. “While workers want wages in cash, some of our suppliers insist on cash and carry and this is causing us a major problem. The impact of demonetization will be felt for one more year,” he said.
Further south, a leading florist in the Kerala capital of Thiruvananthapuram, who sources about 70 per cent of his flowers from Benguluru, said his business has been affected. “The biggest mistake I made was not taking a swiping machine as I never felt the need for it. I am forced to reduce my orders, as customers are not walking in as before and a huge majority of them ask me if payment can be made through cards,” the florist said.
In Srinagar, where shops and establishments recently reopened after over 130 days of curfew, Mohiuddin Hakim, 60, who has been in the wholesale grocery goods business for over 30 years, said he has never been hit so hard by a cash crunch all these years.
“It looks like I have lost all my business while my stocks and bank accounts are still intact. It is like going bankrupt without losing a penny,” he said while turning back a few retailers who used to take goods on credit from him and would clear their accounts at month-end.
A Kolkata-based noodles manufacturer said that after demonetization he has been forced to run his unit at sub-optimal capacity. The daily production has been slashed by 40 per cent.
Middlemen suppliers and traders in noodles have also been feeling the pinch of the cash crunch. “With the falling sales volume, our daily revenue from selling noodles was also squeezed. We usually keep a margin of Rs 2-2.50 a kg for a daily sell of around 180 kg,” Soumen Samajpati, a noodles trader, told IANS.

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